YOUR 

Street  Car 

SERVICE 

A  STATEMENT  OF  THE  FACTS 
ABOUT  THE  SITUATION  OF  THE 
NEW  YORK  RAILWAYS  COMPANY 


ISSUED       BY  THE 

NEW  YORK  RAILWAYS  COMPANY 


Avery  Architectural  and  Fine  Arts  Library 
Gift  of  Seymour  B.  Durst  Old  York  Library 


DHL.  (C$OQ 


60K  $°l 


YOUR 

Street  Car 

SERVICE 

Why  an 

Eight  Cent  Fare? 

I.    To  Meet  Higher  Prices 
II.    To  Pay  High  Wages 
III.    To  Preserve  Credit 

» 

and  to 


Provide 


Good 


Service ! 


7 


AK 


Digitized  by  the  Internet  Archive 
in  2014 


http://archive.org/details/yourstreetcarserOOnewy 


PREFATORY 


1. 


THE  CASE  IN  A  NUTSHELL 


HE  New  York  Railways  Company  is  on  the 


economically  operated.  It  has  never  paid  a  dividend 
on  its  stock. 

"Rising  Costs  (due  to  the  war)  and  Fixed  Fares" 
tell  the  story.  Wages  are  up  70  per  cent. ;  materials 
more  than  100  per  cent. ;  taxes  are  higher. 

Our  entire  passenger  revenue  is  not  enough  to  pay 
for  labor,  and  materials  for  the  service,  and  taxes. 

In  about  400  other  communities  they  have  increased 
fares  to  all  the  way  from  6  to  10  cents.  Boston  pays 
8  cents. 

*    *  * 

We  have  applied  for  an  8-cent  fare  and  3  cents 
charge  for  a  transfer.   For  the  City  not  to  grant  it  will : 

1.  Force  bankruptcy. 

2.  Disrupt  service  and  transfers. 

(If  the  leased  lines  are  returned  to  their  owners 
each  line  can  charge  a  5  cent  fare,  with  no  obliga- 
tion to  give  free  transfers.) 

3.  Add  to  the  already  serious  general  business  situation 

due  to  the  impaired  credit  of  electric  railway 
securities  which  in  New  York  State  alone 
amounts  to  a  billion  and  a  quarter  dollars. 


In  opposition  to  the  fare  increase  it  is  charged  we 
are  paying  "excessive  rentals"  to  the  owners  of  the 
leased  lines  (all  necessary  to  a  complete  system  with 
transfers). 


verge  of  a  receivership. 

The  Company  is  not  overcapitalized.    It  is 


* 


4 


Why  an  8-Cent  Fare 


The  charge  is  not  well  founded ;  for  the  sum  total  of 
the  net  rentals  is  only  5  per  cent,  of  the  present  value  of 
those  lines. 

*    *  * 

As  to  municipal  operation — It  cannot  be  cheaper ;  the 
City  admits  it  would  have  to  increase  fares  at  once. 
And  under  municipal  operation — 

1.  Jobs  would  be  held  for  political  reasons,  instead  of 

efficiency  reasons. 

2.  Political  discipline  and  high  accident  rate,  instead 

of  business  discipline  and  lower  accident  rate. 

3.  Change  of  management  after  every  election. 

Bankruptcy  of  this  Company  would,  in  short,  cost 
the  public  far  more  than  added  fare. 

In  the  following  pages  the  points  here  indicated 
briefly  will  be  developed  in  more  detail. 

Four  Important  Questions. 

There  will  be  four  questions  to  consider: 

1.  What  is  the  situation? 

2.  What  caused  it? 

3.  What  does  it  mean  to  the  public  interest? 

4.  What  should  be  done  about  it? 

If  the  answers  of  these  are  apprehended  clearly  the 
course  of  wisdom — and  of  duty  to  the  public — will  be 
plain.  The  arguments  advanced  against  the  increase 
will  also  be  analyzed. 


On  The  Green  Car  Lines? 


5 


II. 

THE  SITUATION  OF  THE  NEW  YORK 
RAILWAYS  COMPANY. 

A  petition  to  the  Board  of  Estimate  of  New  York 
City  for  an  8-cent  cash  fare,  and  3  cents  charge  for 
transfers,  to  meet  excessive  costs  of  operation,  due  to 
the  war,  has  been  filed  by  the  New  York  Railways 
Company  operating  the  "green  car"  surface  lines  in 
New  York  City. 

The  increases  asked,  it  will  be  shown,  are  in  the 
interest  of  the  public  we  serve.  It  will  meari  to  the 
public  a  saving  of  costs  far  greater  than  the  added 
fares. 

Not  a  Matter  of  Dividends. 

The  point  should  be  here  emphasized:  this  is  not  a 
question  of  dividends,  for  this  is  not  a  "rate  case" 
proper.  It  is  purely  an  "emergency  action"  to  prevent 
bankruptcy  of  the  company,  and  to  preserve  service 
for  the  public.  Except  for  the  temporary  emergency 
it  does  not  ask  the  City  to  alter  franchises,  nor  to 
abrogate  any  of  its  rights  or  powers. 

In  the  application  for  an  increase  of  fare  the  Presi- 
dent of  this  Company  said : 

We  do  not  ask  that  any  return  be  assured,  at  this 
time,  beyond  that  necessary  to  avoid  bankruptcy.  An 
appraisal  of  the  property  and  the  question  of  the  fair 
return  upon  the  value  ascertained  will  naturally  take 
several  months  of  time. 

During  that  period  we  are  willing  that  the  revenues 
above  what  is  needed  to  avoid  bankruptcy  be  held  by 
trustees  and  ultimately  be  disposed  of  as  may  hereafter 
be  agreed  upon  or  determined  by  arbitration. 

Our  studies  indicate  that  for  the  immediate  future 


6 


Why  an  8-Cent  Fare 


the  surface  lines  should  be  authorized  to  charge  an 
eight- cent  fare  and  three  cents  for  a  transfer.  Such 
charges  during  the  next  eighteen  months  should  pro- 
vide only  a  reasonable  return  on  the  actual  value  of 
the  New  York  Railways  property  used  in  the  public 
service  and  accumulate  in  addition  about  $2,000,000  for 
the  benefit  of  the  City.  But  I  repeat  that  we  are  will- 
ing that  every  dollar  above  what  is  necessary  to  keep 
the  property  intact  as  a  going  concern  may  be  held  in 
trust  until  the  property  shall  be  appraised  and  the 
ratio  of  return  agreed  upon  by  the  City. 


On  The  Green  Car  Lines? 


7 


HI. 

FACTS  ABOUT  THE  NEW  YORK  RAILWAYS 

COMPANY. 

The  New  York  Railways  Company  was  incor- 
porated December  29,  1911,  succeeding,  through  a  re- 
organization plan,  the  Metropolitan  Street  Railway 
Company  and  the  New  York  City  Railway  Company, 
which  had  been  in  the  hands  of  receivers : 

Track  Mileage. 

The  New  York  Railways  Company  on  June  30,  1918, 
had  151.017  miles  of  single  track,  divided  as  follows: 


Status  of  Lines.  Mileage. 

Owned    42.756 

Leased    96.646 

Operated  under  agreement   11.615 


Total   151.017 


Fares  and  Transfers, 

The  fare  is  5  cents,  and  free  transfers  are  given  be- 
tween the  various  lines,  and  also  at  certain  points  to 
"foreign"  lines,  or  those  which  do  not  form  a  part  of 
the  New  York  Railways  system. 

Capitalization. 

The  capitalization  of  the  New  York  Railways  Com- 
pany is  $76,018,087.19. 

This  is  the  sum  total  of  stock,  bonds,  convertible 
scrip,  underlying  bonds,  and  other  mortgage  indebted- 
ness, outstanding  at  June  30,  1918. 

This  company  has  always  been  under  jurisdiction  of 


8 


Why  an  8-Cent  Fare 


the  Public  Service  Commission.  The  capitalization  of 
the  company,  exclusive  of  $21,612,144  stocks  and  bonds 
of  the  leased  lines,  in  the  hands  of  the  public,  is  as 


follows : 

Classification.  Amount. 
Capital    Stock    (par   value   $100  per 

share)    $17,495,060.00 

Funded  Debt   48,673,027.19 

Underlying  mortgage  bonds  (less  $900,- 

000.00  such  bonds  acquired)   9,850,000.00 


Total    $76,018,087.19 


The  stock  of  this  company  has  never  paid  a  dividend. 


On  The  Green  Car  Lines? 


9 


IV. 

WHAT  IS  THE  COMPANY'S  FINANCIAL 

SITUATION? 

The  company  is  in  danger  of  receivership. 

Owing  to  conditions  produced  by  the  war  its  ac- 
cumulated funds  are  about  exhausted  and  for  several 
months  its  passenger  revenue  has  not  equalled  oper- 
ating expenses  and  taxes. 

The  Board  of  Estimate,  in  whom  the  pnmary  power 
of  increasing  fares  resides,  has  so  far  refused  to  do  so 
and  the  Company's  credit  is  exhausted. 

By  deferring  other  claims,  it  managed  to  meet  bond 
interest  on  January  1,  but  without  early  relief  by  the 
Board  of  Estimate  bankruptcy  is  inevitable.  These 
are  the  facts; 

1.  Since  June  30,  1916,  it  has  paid  no  interest  on  the 
"second  mortgage"  (Thirty  year  adjustment  mortgage, 
5  per  cent,  income  gold  bonds  dated  January  1,  1912, 
amounting  to  $30,609,487.)  This  interest  is  payable  only 
if  earned. 

2.  It  is  not  earning  the  interest  on  the  "first  mort- 
gage," (Thirty-year  first  real  estate  and  refunding 
mortgage,  4  per  cent,  gold  bonds,  dated  January  1,  1912, 
amounting  to  $18,063,539.75.)  Default  in  this  interest 
would  be  cause  for  a  receivership. 

3.  Both  gross  income  and  net  revenue  have  been  fall- 
ing. 

The  Downward  Trend. 

Worse  still,  the  trend  is  still  downward. 

The  following  record  (cents  omitted)  shows  the 


10 


Why  an  8-Cent  Fare 


downward  trend.  It  is  taken  from  the  company's 
books,  which  are  kept  in  accordance  with  the  forms 
prescribed  by  law  and  from  which  reports  to  Na- 
tional and  State  governments  are  made : 


Net  Income 

Available 

for  Interest  on 

1st  Mtge.  4% 

Year  Ended  June  30 

:        Gross  Income. 

Bonds. 

,  $4,529,331 

$1,833,776 

  4,453,588 

1,780,579 

4,332,718 

1,591,703 

4,870,199 

2,162,316 

3,240,887 

574,834 

1918  

3,245,457 

568,908 

Five  months  ended 

Nov. 

30, 1918  

  782,780 

t306,743 

♦Strikes  in  effect  during  the  greater  portion  of  first 
half  of  this  fiscal  year. 
fDeficiency. 

The  annual  interest  requirement  on  the  $18,063,540 
of  4  per  cent,  first  mortgage  bonds  for  the  year  ended 
June  30,  1918,  was  $722,542. 

If  the  full  interest  had  been  earned  during  any  year 
on  the  $30,609,487  of  adjustment  mortgage  5  per  cent, 
income  bonds  outstanding,  the  additional  annual  re- 
quirement would  be  $1,530,474. 

On  January  1,  1918,  there  was  a  deficit  of  $924,947, 
and  on  December  1,  1918,  it  had  grown  to  $1,978,682, 
an  increase  of  more  than  a  million  dollars. 

Decrease  in  Monthly  Passenger  Revenue. 

Further,  the  downward  trend  is  evidenced  by  the  fol- 
lowing statement  of  decreases  in  the  monthly  pas- 


On  The  Green  Car  Lines? 


11 


senger  revenue  beginning  with  the  month  of  January, 
1918,  as  compared  with  the  same  months  of  the  preceding 
year : 

<  Decrease  » 


1918. 

1917. 

Amount. 

P.  C. 

$965,539 

$124,624 

12.9 

  806,099 

883,698 

77,599 

8.8 

  958,540 

1,021,094 

62,554 

6.1 

959,396 

1,003,040 

43,644 

4.4 

  993,628 

1,015,567 

21,939 

2.2 

  909,641 

1,052,804 

143,163 

13.6 

,    ,  ,  ,  884,949 

1,069,765 

184,816 

17.3 

905,553 

1,110,084 

204,531 

18.4 

926,584 

1,019,760 

93,176 

9.1 

  913,118 

1,074,927 

161,809 

15.1 

  881,603 

969,678 

88,075 

9.1 

Total   

 $9,980,026 

$11,185,956 

$1,205,930 

10.8 

July  1  to  Nov.  30. $4,511,807 

$5,244,214 

$732,407 

14.0 

The  folio 

wing  comparison  of  the 

same  months  of 

1918  with  the  corresponding  months  of  the  fiscal  year 

ended  June 

30,  1914  (the 

year  before  the  war),  shows 

the  decline  from  the  normal  or  pre-war  period : 

,  Decrease  ^ 

1918. 

1914. 

Amount. 

P.  C. 

,   $840,915 

$1,123,411 

$282,496 

25.1 

  806,099 

915,074 

108,975 

11.9 

,   958,540 

1,004,348 

45,808 

4.6 

  959,396 

1,110,983 

151,587 

13.6 

  993,628 

1,162,210 

168,582 

14.5 

  909,641 

1,129,550 

219,909 

19.5 

1918. 

1913. 

July   

  884,949 

1,140,965 

256,016 

22.4 

  905,553 

1,151,782 

246,229 

21.4 

  926,584 

1,180,455 

253,871 

21.5 

  913,118 

1,230,845 

317,727 

25.8 

  881,603 

1,104,902 

223,299 

20.2 

Total   

 $9,980,026 

$12,254,525 

$2,274,499 

18.6 

July  1  to  Nov.  30. $4,511,807 

$5,808,949 

$1,297,142 

22.3 

Figures  by  Months  Compared. 

The  desperate  financial  condition  of  the  company  is 
even  more  sharply  apparent  when  the  figures  begin- 
ning with  the  month  of  January,  1918,  are  compared 


12 


Why  an  8-Cent  Fare 


with  the  corresponding  months  of  the  fiscal  year  ended 
June  30,  1914 — a  normal  or  pre-war  period — as  follows : 

Net  Income  Available  for  Interest  on  First 
Mortgage  4%  Bonds. 


1918.  1914.  Decrease. 

January    $32,693*  $128,244  $160,937 

February    32,005*            18,931  50,936 

March    13,514              47,340  33,826 

April    75,634  129,045  53,411 

May   6,145  176,023  169,878 

June    48,698*  250,912  299,610 

1918.  1913.  Decrease. 

July    $29,928*  $148,971  $178,899 

August    13,310*  156,214  169,524 

September    94,049*  190,078  284,127 

October    60,604*  227,247  287,851 

November    108,850*  194,299  303,149 


*  Deficiency. 

On  January  14,  1919,  at  the  request  of  the  Public 
Service  Commission,  the  Company  submitted  an  esti- 
mate showing  that  (at  the  existing  rate  of  fare  and 
on  the  basis  of  actual  costs  of  materials,  supplies,  labor, 
accidents  and  damages  up  to  November  30,  1918,  and 
the  estimated  costs  for  the  remainder  of  the  fiscal  year 
ending  June  30,  1919),  the  revenue  from  street  railway 
operation  for  that  fiscal  period  will  fall  short  of  pay- 
ing the  expenses  of  operation  and  taxes  by  more  than 
$2,000,000.  This  estimate  disregards  accruals  apply- 
ing to  maintenance  and  depreciation  and  accidents  and 
damages  reserves.  It  considers  only  actual  (out-of- 
pocket)  money  outlay.  Further,  this  estimate  makes 
no  allowance  for  rentals  of  leased  lines,  dividends,  in- 
terest on  bonds,  needed  replacements  and  other  neces- 
sary requirements. 

The  actual  results  of  the  operation  of  these  lines 
show  that  for  the  months  of  September,  October  and 
November  (the  latest  complete  figures  available),  the 
passenger  revenue  was  not  sufficient  to  pay  the  operat- 
ing expenses  and  taxes.  Only  a  slight  improvement 
has  been  shown  since. 


On  The  Green  Car  Lines? 


13 


V. 

WHAT  HAS  CAUSED  THIS  SITUATION. 

The  immediate  situation,  entirely  abnormal,  is  al- 
most wholly  due  to  the  war.  It  is  a  situation  over 
which  neither  this  company,  nor  any  other  utility 
company,  has  had  any  control.  The  factors  entering 
into  the  increased  cost  of  giving  service,  briefly  stated, 
are  these: 

(a)  Rises  in  the  cost  of  labor. 

(b)  Rises  in  the  cost  of  materials  and  supplies. 

(c)  Rises  in  taxes. 

(d)  Rise  in  the  cost  of  money. 

(e)  Loss  of  traffic,  due  to  war  conditions. 

In  addition,  the  company  has  had  almost  no  control 
over  business  factors  affecting  it  in  a  very  important 
degree. 

1.  The  scale  of  wages  which  we  have  been  forced  to 
meet  in  a  war-time  labor  market. 

2.  The  service  to  be  provided,  hence  the  equipment 
and  men  needed,  are  prescribed  by  the  public  author- 
ities. 

3.  Our  rate  of  fare  has  been  fixed  by  franchise,  and 
can  be  altered  only  by  the  Board  of  Estimate  and 
Public  Service  Commission. 

4.  The  prices  for  the  most  important  commodities  we 
buy  have  been  determined  by  Government  agencies. 

5.  The  Government  has  so  largely  absorbed  the  sup- 
ply of  money  that  rates  have  been  abnormally  high. 

In  comparison  with  these  factors,  such  expenditures 
as  the  company  could  control  (executive  salaries,  di- 
rector fees,  etc.)  have  been  of  infinitesimal  importance. 
If  these  expenditures  were  reduced  to  zero  it  would 
not  alter  the  seriousness  of  the  situation. 

War  Conditions  and  Labor. 

The  following  extraordinary  labor  conditions  have 
hampered  the  New  York  Railways  Company  and,  de- 


14 


Why  an  8-Cent  Fare 


spite  the  cessation  of  fighting,  conditions  are  still  far 
from  normal. 

1.  Large  numbers  of  experienced  employees  have 
been  drafted,  or  have  volunteered  for  service. 

2.  Many  others  have  gone  into  other  industries, 
lured  by  rates  of  wages  that  on  our  existing  income 
could  not  possibly  be  met. 

3.  The  labor  market  has  been  so  drained,  that  a 
sufficient  number  of  new  employees  of  the  character 
and  intelligence  essential  to  safe  public  service,  have 
been  difficult  to  obtain  at  any  price  and  wages  have 
risen  to  points  hitherto  unknown  in  the  industry. 

4.  Some  of  the  former  sources  of  labor  supply  have 
been  closed.  Industries  in  New  York  State,  employing 
100  or  more  workers,  have  not  been  allowed  to  procure 
unskilled  male  labor  through  the  fee -charging  agencies. 
They  had  to  obtain  them  through  the  New  York  State 
Labor  Board,  and  Government  work  (generally  at 
higher  pay)  had  the  preference. 

Rising  Cost  of  Labor. 

This  company,  like  most  other  employers  of  labor,  has 
made  enormous  increases,  since  the  war,  in  its  wage 
rates.  The  increases  in  rates  of  wages  since  January 
1,  1916,  have  been  enough  to  increase  the  payroll  (for 
the  same  number  of  men)  by  $3,250,000  a  year. 

The  rates  put  into  effect  in  August  and  September, 
1918,  alone  made  an  increase  of  approximately  $1,250,000 
a  year. 

Increased  Cost  of  Labor  in  Its  Relation  to  Decreased 

Revenue. 

A  comparison  of  the  Total  Payroll  Expense  per  car 
mile  of  the  Operating  Departments  for  the  month  of 
October,  1918,  with  the  month  of  July,  1914  (the  month 
before  the  war),  shows  the  following: 

Expense  in 
Cents  per 
Revenue 


Month.  Car  Mile. 

October,  1918   25.03 

July  1914   12.91 

Increase:   

Amount    12.12 

Per  Cent   93.88 


On  The  Green  Car  Lines? 


15 


A  comparison  of  the  same  months  shows  the  Total 
Payroll  Expense  per  dollar  of  Transportation  Revenue 
or  Passenger  Earnings  as  follows: 

Expenses 

(Cents)  per 
Dollar  of 

Passenge 

Month.  Earnings. 

October,  1918   56.47 

July,  1914   35.10 

Increase:   

Amount    21.37 

Per  Cent   60.88 

A  comparison  of  the  Transportation  Revenue  for  the 
same  months  shows  the  following: 

Transportation 
Month.  Revenue. 

October  1918   $913,118 

July,  1914   1,095,788 

Decrease:   

Amount    $181,670 

Per  Cent   16.67 

A  Better  Comparison. 

While  in  order  to  show  the  increase  in  labor  costs  now 
current  over  those  prevailing  just  prior  to  the  war  it  is 
necessary  to  compare  the  month  of  October,  1918,  with 
the  month  of  July,  1914,  the  foregoing  comparison  of  the 
Transportation  Revenue  for  the  same  months  is  not  as 
true  a  comparison  from  which  to  consider  a  decrease  of 
passenger  earnings  as  is  a  comparison  of  the  corre- 
sponding months,  viz.,  October,  1918,  with  October,  1913 
(the  pre-war  period).   Such  comparison  is  as  follows: 

Transportation 
Month.  Revenue. 

October,  1918   $913,112 

October,  1913   1,230.345 

Decrease:   

Amount   $317,727 

Per  Cent   25.81 

From  the  foregoing  it  will  be  noted  that  there  has  been 
a  decrease  of  from  17  per  cent,  to  26  per  cent,  in  our 


16 


Why  an  8-Cent  Fare 


Transportation  Revenue,  while  our  payroll  costs  per  dol- 
lar of  Transportation  Revenue  have  increased  21.37  cents 
(from  35.10  cents  to  56.47  cents).  This  is  an  increase 
of  60.88  per  cent. 

Our  payroll  cost  per  revenue  car  mile  has  increased 
12.12  cents  (from  12.91  cents  to  25.03  cents),  or  93.88 
per  cent. 

Money  and  Materials. 

Not  only  have  labor  conditions  been  serious,  but 
the  situation  as  to  materials  and  capital  has  been 
equally  difficult.   Note  these  points : 

1.  Coal  has  practically  doubled  in  price  and  has 
been  difficult  to  get,  as  other  war  demands  have  had 
priority  over  public  utilities. 

2.  The  average  cost  of  the  most  important  supplies 
and  materials  essential  to  electric  railway  operation 
and  maintenance  has  at  least  doubled. 

3.  The  Government  has  largely  absorbed  the  supply 
of  money,  and  has  established  conditions  precedent  to 
rendering  railway  companies  financial  assistance  which 
are  difficult  and,  for  many  traction  companies,  impos- 
sible to  meet. 

4.  The  monopolization,  to  a  large  extent,  by  the 
Government  of  the  money  market  has  created  high 
rates  of  interest  for  funds. 

5.  Taxes  have  largely  risen. 

Increased  Cost  of  Materials. 

The  increases  in  cost  of  materials  have  been  no  less 
striking.  The  table  on  the  following  page  is  made  up 
from  our  books  and  shows  actual  purchases  made.  It 
is  not  a  list  of  items  selected  to  make  a  showing,  but 
important  articles  of  which  we  buy  large  quantities. 


On  The  Green  Car  Lines? 


17 


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18 


Why  an  8-Cent  Fare 


As  good  a  trolley  car  as  one  that  cost  $5,000  in  1912 
would  now  cost  $10,000  or  more. 

The  average  cost  of  our  materials  and  supplies  is  fully 
one  hundred  per  cent,  higher  than  it  was  before  the  war. 

While  some  recession  in  prices  of  particular  commodi- 
ties may  be  expected  with  the  return  of  normal  con- 
ditions, these  will  not  meet  the  present  emergency.  It 
is  also  true  that  prices  after  all  great  wars  within  the 
last  century  have  on  the  average  been  higher  for  sev- 
eral years  after  the  war  than  during  the  war. 

Increase  in  Taxes. 

Since  the  beginning  of  the  war  the  tax  obligations — 
which  are  always  heavy — have  grown  more  burden- 
some. In  normal  times  the  taxes  paid  by  this  Com- 
pany were  comparatively  larger  than  those  of  other 
street  railroads  in  the  State.  Now  the  difference  is 
even  greater. 

The  total  of  all  classes  of  taxes — local,  State  and 
National — paid  by  the  New  York  Railways  Company 
for  the  year  ended  June  30,  1914,  was  $1,164,072.57, 
or  26.14  per  cent,  of  the  gross  income,  while  for  the 
year  ended  June  30,  1918,  there  was  paid  or  accrued 
$1,286,125.13,  or  39.63  per  cent,  of  the  gross  income. 

Loss  of  Traffic. 

The  loss  of  traffic,  as  compared  with  the  fiscal  year 
ended  June  30,  1914  (the  year  before  the  war),  is  in- 
dicated by  the  following  statement: 


Decreases. 

Free 

Year  ended            Revenue          Transfer  Passenger 

June  30.             Passengers.     Passengers.  Total.  Revenue. 

1915                         6,665,536         664,105  7,329,641  $410,748 

Per  Cent                     2.4               0.6  1.9  3.1 

1916                         1,788,548*      2,085,542  296,994  42,633 

Per  Cent                      0.7                1.9  0.1  0.3 

tl917                       43,452,960      25,519,326  68,972,286  2,225,951 

Per  Cent                    15.9              23.1  18.0  16.6 


On  The  Green  Car  Lines? 


19 


1918    34,849,794  26,715,947  61,565,741  1,806,433 

Per  Cent   12.8              24.2  16.1  13.5 

July  1  to  Novem- 
ber 30,  1918...  25,572,475  18,011,695  43,584,170  1,297,142 
Per  Cent   21.7              37.8  26.3  22.3 


♦Increase. 

An  increase  in  Revenue  Passengers  during  1916  is  here  indi- 
cated. This  is  due  principally  to  the  fact  that  the  year  1916 
includes  4,452,759  passengers  carried  at  3  cents  from  or  to  the 
Staten  Island  Ferry  under  a  municipal  joint  traffic  agreement. 
This  agreement  was  not  in  effect  during  1914.  Eliminating 
such  passengers  the  comparison  would  indicate  a  decrease  of 
2,664,211  passengers,  or  1.0  per  cent. 

This  element  similarly  affects  the  figures  shown  for  other 
years. 

t  Strike  in  effect  during  greater  portion  of  first  half  this  year. 


20 


Why  an  8-Cent  Fare 


VI. 

WHAT  THIS   SITUATION   MEANS  TO  THE 

PUBLIC. 

The  most  important  consideration  in  this  situation 
is  the  peril  to  the  public  interest.  This  may  be  con- 
sidered under  two  main  heads: 

(a)  Injury  to  street  railway  service,  and  unavoidable 
increase  in  its  cost  to  the  public  under  a  receivership. 

(b)  Injury,  not  only  to  the  credit  of  this  company, 
but  to  credit  of  other  utilities  in  the  city  of  New  York. 

Injury  to  Public  Service. 

In  case  of  receivership  under  direction  of  the  courts 
the  system  would  necessarily  be  operated  to  conserve 
the  interests  of  its  shareholders  and  creditors.  Such 
lines  as  do  not  pay  or  could  not  be  made  to  pay  could 
be  discontinued. 

Loss  of  Transfers. 

The  next  important  consideration  is  the  disintegra- 
tion of  the  system  of  transfers. 

In  a  normal  day's  traffic  about  360,000  persons  use 
transfers  in  riding  on  the  New  York  Railways  Com- 
pany trolley  lines.  This  is  about  the  number  of  people 
in  Newark,  Denver,  Atlanta,  Milwaukee,  Minneapolis 
or  Kansas  City.   At  a  nickel  each  these  transfers  would 

cost  $18,000  a  day  in  actual  money. 

*  *  * 

Money  Saved  to  the  Public. 

This  transfer  system  has  saved  the  public  millions  of 

dollars  and  great  inconvenience. 

*  *  * 

By  leasing  or  otherwise  controlling  the  separate 
companies  we  were  enabled  to  operate  the  following 


On  The  Green  Car  Lines? 


21 


companies'  lines  as  one  great  system  with  universal 
transfers : 

New  York  Railways  Company. 

Broadway  and  Seventh  Avenue  Railroad  Company. 

Forty-second  Street  and  Grand  Street  Ferry  Railroad 
Company. 

Thirty-fourth  Street  Crosstown  Railway  Company. 

Fort  George  and  Eleventh  Avenue  Railroad  Com- 
pany. 

Central  Crosstown  Railroad  Company. 

Twenty-third  Street  Railway  Company. 

Bleecker  Street  and  Fulton  Ferry  Railroad  Company. 

Christopher  and  Tenth  Street  Railroad  Company. 

Eighth  Avenue  Railroad  Company.  . 

Ninth  Avenue  Railroad  Company. 

Sixth  Avenue  Railroad  Company. 

New  York  and  Harlem  Railroad  Company  (City 
Line). 

Too  much  emphasis  cannot  be  laid  upon  the  fact  that 
every  leased  line  is  necessary  to  a  complete  system, 
which,  with  universal  transfers,  could  give  the  best 
and  most  convenient  service. 

Transfers  Lost  Through  Receivership. 

The  costly  experience  to  the  public  in  losses  of 
transfers  during  the  receivership  of  the  Metropolitan 
Company — which  formerly  operated  nearly  all  the 
New  York  street  cars — is  still  vivid.  Their  system 
fell  apart  and  transfers  were  cut  down  right  and 
left.  The  Third  Avenue  and  Second  Avenue  Com- 
panies went  into  receiverships,  and  still  more  trans- 
fers were  lost. 

*    *  * 

One  phase  of  this  transfer  situation  has  been  mis- 
understood, and  the  statement  has  been  made  that 
the  Public  Service  Commission  can  compel  the  con- 
stitutent  companies — even  though  the  New*  York 
Railways  system  be  disintegrated,  and  its  constituent 
lines  be  returned  to  their  original  owners — to  continue 
transfers  from  one  line  to  another. 


22 


Why  an  8-Cent  Fare 


Transfers  Would  Cost  Money. 

So  far  as  through  routing  with  transfers  is  con- 
cerned, this  is  true.  But  the  courts  have  decided  that 
no  public  authority  has  the  power  to  compel  service 
at  charges  which,  being  "confiscatory,"  are  in  viola- 
tion of  that  company's  constitutional  rights.  Hence, 
if  the  cost  of  the  service  warranted  it  a  charge  for 
these  transfers — or  some  other  equivalent  charge — 
could  be  made. 

Effects  Upon  Business. 

The  serious  effects  upon  business  interests  that  a 
receivership  might  bring  are  too  apparent  to  need  re- 
cital. It  is  well  understood  by  the  leading  business 
organizations  of  the  city.  The  Merchants'  Associa- 
tion, the  Broadway  Association,  the  New  York  Board 
of  Trade  and  Transportation,  the  Hotel  Association 
of  New  York,  the  Italian  Chamber  of  Commerce,  the 
Real  Estate  Board  of  Trade,  the  Pan-American  Cham- 
ber of  Commerce,  the  Washington  Heights  Taxpay- 
ers' Association,  the  Leaf  Tobacco  Board  of  Trade 
and  others  have  already  taken  action  upon  the  com- 
pany's petition,  expressing  themselves  formally  in 
favor  of  early  settlement  of  the  problem. 

Injury  to  Credit. 

One  of  the  major  considerations  with  every  invest- 
ment house  or  private  investor  in  public  utilities  is  the 
attitude  of  the  governing  authorities  toward  such 
companies.  Their  powers  are  very  great.  Hence  any 
action  in  a  public  utility  case  that  seems  to  the  invest- 
ment community  to  denote  an  incorrect  conception  of 
fundamental  principles  immediately  affects  not  only 
the  credit  of  the  particular  company,  whose  case  is  at 
bar,  but  the  whole  class  of  enterprises  within  their 
jurisdiction. 


On  The  Green  Car  Lines? 


23 


VII. 

WHAT  SHOULD  BE  DONE  ABOUT  IT. 

The  State  and  especially  the  City  of  New  York 
have,  in  a  large  measure,  failed  to  answer  the  admoni- 
tions of  the  President  of  the  United  States,  the  Secre- 
tary of  War,  the  Comptroller  of  the  Currency,  the 
War  Labor  Board  and  the  United  States  Chamber  of 
Commerce  to  meet  the  emergency  needs  of  the  elec- 
tric railways,  and  to  thus  preserve  their  service,  so 
vital  to  the  prosperity  of  modern  communities. 

Clearly,  in  most  cases,  if  the  needs  of  the  electric 
railway  companies  are  not  met  it  means  reduction  or 
total  loss  of  service  to  the  people. 

The  First  Point  Is  to  Preserve  Service. 

The  first  and  most  important  point  is  to  preserve 
the  public's  service.  That  should  not  be  even  tem- 
porarily injured.  For  service,  though  it  costs  only  a 
fewr  cents,  cannot  be  accurately  stated  in  money  terms. 
Good  service  is  the  community's  health ;  and  like  a 
man's  health  it  is  without  price.  It  is  worth  whatever 
it  costs.  The  surgeon's  fee  fails  to  measure  the  real 
value  of  his  service. 

Other  States  have  heeded  the  President's  appeal  to 
a  much  larger  degree.  A  report  compiled  by  the  sta- 
tistical department  of  the  American  Electric  Railway 
Association  says  that  increases  of  fare,  in  one  form  or 
another,  have  been  granted  to  about  400  companies  in 
the  United  States.  Very  few  of  these  are  in  New  York 
State,  though  its  investment  in  electric  railways  is 
about  one-fifth  of  the  nation's  total. 


24 


Why  an  8-Cent  Fare 


A  Local  Problem. 

This  is  a  local  problem.  The  Government  has  defi- 
nitely taken  the  position  that  relief  of  local  electric 
railways  is  not  a  function  of  the  National  Government. 
Relief  must  be  given  by  local  authorities. 

Twenty  Months  of  Delay. 

It  is  about  twenty  months  since  this  company  first 
asked  the  Public  Service  Commission  to  authorize  a 
charge  for  transfers.  Since  that  time  the  war  time 
prices,  which  still  persist,  have  made  it  necessary  to 
ask  for  an  8-cent  cash  fare,  with  a  3-cent  charge  for 
transfers. 

While  the  City  is  not  a  partner  in  the  New  York 
Railways,  this  service  is  just  as  necessary  in  its  sphere 
as  the  service  of  the  rapid  transit  lines.  They  are  the 
agency  for  rendering  the  service  and  it  would  not 
benefit  the  public  to  lessen  the  power  to  render  it. 

It  is  impossible  to  continue  to  provide  service  for 
less  than  it  costs  many  weeks  longer.  No  matter 
whether  the  lines  continue  to  be  operated  by  a  receiver, 
or  by  the  City,  the  bills  for  wages,  for  materials,  etc., 
will  be  no  lower,  and  without  meeting  the  unavoidable 
costs  the  service  cannot  be  furnished.  Increased  in- 
come is  the  only  solution. 

Thus  far  no  statement  of  the  needs  of  the  public 
service,  the  equities  of  the  case  or  of  the  facts  about 
the  companies  has  been  able  to  enlist  the  favorable 
action  of  the  local  authorities  of  New  York  City,  who 
primarily  have  the  rate  making  power,  and  hence  the 
very  existence  of  the  companies  in  their  hands. 

The  Massachusetts  Experience. 

Convincing  evidence  that  the  situation  is  due  to  ab- 
normal costs  is  given  by  the  experience  in  Massa- 
chusetts.    In  that  State,  last  year,  legislation  was 


On  The  Green  Car  Lines?  25 


passed  by  which  the  Boston  Elevated  (which  includes 
the  elevated,  subway  and  most  of  the  surface  trans- 
portation in  the  city)  was  taken  over  on  the  first  day 
of  last  July  to  be  managed  financially  and  operated 
by  a  State  Board  of  Trustees.  They  found  it  neces- 
sary to  raise  the  fare  on  August  1,  from  5  cents  to  7, 
and  after  four  months'  operation,  which  showed  a 
large  deficit,  to  8  cents.   A  deficit  is  still  indicated. 

The  law  under  which  the  State  operation  is  pro- 
ceeding provides  a  guaranteed  return  on  the  invested 
capital,  and  if  net  income  from  operation  is  not  suffi- 
cient to  provide  it,  the  deficit  is  to  be  met  by  taxation. 

Higher  Fares  Elsewhere. 

Without  going  into  minute  details  suffice  it  to  say 
that  a  few  communities  in  the  United  States  are  now 
paying  10-cent  fares.  Several  others  are  paying  8-cent 
fares;  nearly  200  are  paying  7-cent  fares,  and  about  150 
of  these  are  paying  1  cent  extra  for  transfers.  The 
6-cent  fare  communities  are  very  numerous  and  increas- 
ing rapidly,  while  many  6-cent  fare  places  have  found 
the  sum  insufficient  and  are  fast  becoming  7-cent  fare 
places. 

Of  the  158  cities  numbering  40,000  or  more  of  popu- 
lation ninety  are  paying  increased  fares,  and  applica- 
tions for  increases  were  pending  in  October  in  all  the 
rest  but  seventeen. 

Among  the  very  large  cities  that  are  paying  all 
the  way  from  6  to  8  cent  fares  are  Chicago,  Boston, 
St.  Louis,  Pittsburgh,  Washington,  Milwaukee,  Jersey 
City,  Newark,  Paterson,  Baltimore,  New  Orleans  and 
many  more. 


26 


Why  an  8-Cent  Fare 


VIII. 

THE  ARGUMENTS  AGAINST  INCREASE 

OF  FARES. 

The  serious  arguments  made  against  increase  of  the 
income  of  the  New  York  Railways  Company  are  few. 
The  ones  most  frequently  urged  are  these : 

1.  "EXCESSIVE  RENTALS." 

2.  "EXCESSIVE  CAPITALIZATION." 

3.  "EXCESSIVE  OVERHEAD." 

Let  us  consider  these  in  the  order  named : 

"Excessive  Rentals." 

We  are  paying  certain  rentals — in  the  form  of  divi- 
dends or  interest — to  the  owners  of  securities  of  some 
of  the  companies  in  our  system.  This  matter  should 
be  made  absolutely  clear  for  it  has  been  the  subject 
of  much  misunderstanding. 

First,  it  is  important  to  note  that  the  leased  lines  have 
been  made  immensely  more  valuable  than  they  were 
when  taken  over.  They  have  been  electrified  and  the 
cars  and  other  equipment  made  modern  in  every  respect. 

Second,  it  is  vital  to  recognize  that  a  rental,  when 
stated  in  terms  of  percentage  on  the  stock,  may  sound 
as  if  it  were  too  large  a  rental.  But  it  is  also  true  that 
an  entirely  mistaken  idea  as  to  the  cheapness  or  dearness 
of  the  lease  may  arise  simply  from  the  method  of 
expression. 

The  real  fact  as  to  reasonableness  of  a  lease  appears 
when  the  rental  paid  is  stated  not  as  a  percentage  on  the 
par  value  of  the  stock,  but  on  the  actual  value  of  the 
property  back  of  the  stock.   A  vast  amount  of  money 


On  The  Green  Car  Lines?  27 


has  been  put  into  the  properties  operated  under  lease 
since  the  leases  were  made. 

True  Test  of  Reasonableness. 

The  real  question,  therefore,  is :  "What  is  the  value  of 
the  property  of  which  the  public  is  getting  the  use,  and 
what  is  the  rate  paid  for  it?" 

Take,  for  example,  the  so-called  "21^-per  cent,  lease" 
of  the  Eighth  Avenue  line.  The  stock  has  a  face  value 
(at  par)  of  $1,000,000  and  the  rental  is  $215,000  a  year, 
or  2\y2  per  cent. 

But  the  present  value  of  the  property  of  this  line  is 
$5,970,413.  A  great  deal  of  money  has  been  put  into 
it  since  the  lease  was  made,  and  the  true  rental  of  the 
property  actually  used  by  the  public  is  at  the  rate  of 
only  3.60  per  cent,  on  its  present  value. 

The  title  to  all  these  improvements  is  In  the  lessors. 
That  is  the  law.  So,  while  we  are  paying  rental  equiva- 
lent to  21*^  per  cent,  on  the  stock  (not  considering  inter- 
est at  6  per  cent,  on  $750,000  certificates  of  indebtedness 
— or  $45,000  per  annum — paid  by  the  Eighth  Avenue 
Railroad  Company  out  of  the  rental  of  $215,000),  to 
call  it  a  2\y2  per  cent,  rental  is  to  misrepresent  the 
case. 

So  small  a  return  as  3.60  per  cent,  on  other  public 
utility  property  has  been  decided  by  the  courts  of  this 
State  to  be  "confiscatory."  No  real  estate  dealer  re- 
gards a  rental  under  a  10  per  cent,  basis  as  good 
business. 

One  could  analyze  similarly  other  leased  properties. 

The  Leases  in  Detail. 

The  following  tables  show  the  situation  as  to  all  the 
lines  leased  or  operated  under  agreement  by  the  New 
York  Railways  Company,  both  as  to  ratio  of  return 


28 


Why  an  8-Cent  Fare 


between  rentals  and  securities,  and  between  rentals  and 
the  value  of  the  properties  back  of  the  securities : 

Table  Showing  Return  on  Property  Value. 


Ratio 

yjli.     v  allito 

Annual 

of  property 

rental, 

devoted  to 

Company. 

Valuation. 

Net. 

Operation. 

Bleecker  St.  and  Fulton  Ferry. 

$744,113 

$29,487 

3.96 

10,073,936 

477,494 

4.74 

582,064 

15,000 

2.58 

1,138,552 

61,900 

5.44 

5,970,413 

215,000 

3.60 

42d  and  Grand  St  

1,760,524 

62,667 

3.56 

4,719,360 

402,500 

8.53 

2,830,879 

66,500 

2.35 

3,078,298 

145,000 

4J1 

34th  Street  

268,948 

50,000 

18.59 

23d  Street  

905,983 

95,356 

10.53 

Total    companies   leased  or 

operated  under  agreement.$32,073,070       $1,620,904  *5.05 


Average. 


Table  Showing  Return  on  Securities. 


Annual 

rental, 

Ratio  on 

Company. 

Securities. 

net. 

securities. 

Bleecker  St.  and  Fulton  Ferry. 

$746,400 

$29,487 

3.95% 

Broadway  and  7th  Ave  

8,849,800 

477,494 

5.40% 

Central  Crosstown  

814,900 

15,000 

1.84% 

Christopher  and  10th  St  

800,000 

61,900 

7.20% 

Eighth  Avenue  

1,750,000 

215,000 

12.29% 

42d  and  Grand  St  

348,000 

62,667 

18.01% 

New  York  and  Harlem  

2,850,544 

402,500 

14.12% 

800,000 

66,500 

8.31% 

2,000,000 

145,000 

7.25% 

34th  Street  

1,000,000 

50,000 

5.00% 

23d  Street  

1,592,500 

95,356 

5.99% 

Total    companies    leased  or 

operated  under  agreement. 

$21,612,144 

$1,620,904 

*7.50% 

*  Average. 


On  The  Green  Car  Lines? 


29 


Certain  Property  Not  Taken  Into  Account. 

In  calculating  the  percentage  that  the  rental  bears 
to  the  value  of  the  property,  no  account  is  taken  above 
of  property,  either  land  or  buildings,  not  used  in  opera- 
tion. That  amounts  to  $328,501,  and  if  it  were  included 
the  average  percentage  would  fall  from  5.05  to  an  even 
5  per  cent. 

These  figures  also  exclude  the  securities  of  the  above 
listed  lines  acquired  by  this  Company  to  reduce  the 
rentals  paid  to  other  security  holders.  The  rentals  thus 
excluded  and  returned  to  the  New  York  Railways  Com- 
pany, as  dividends  on  securities  owned,  are  as  follows : 


1.  Broadway  and  7th  Avenue  Railroad  Company, 

14,002  shares,  at  10%   $140,020.00 

2.  42d  and  Grand  Street  Ferry  Railroad  Company, 

4,000  shares,  at  18%   72,000.00 

3.  23d  Street  Railway  Company,  5,075  shares,  at 

18%    91,350.00 

4.  Bleecker    Street    and    Fulton    Ferry  Railroad 

Company,    8,536    shares,    at    %%,    $12,804 — 

(actually  earned  during  the  year  1918)   12,613.67 


Total    $315,983.67 


NOTF. — This  sum  of  $315,983.67,  added  to  $1,620,904,  makes  the 
total  rental,  frequently  stated  as  $1,936,887;  but  it  must  be  remembered 
that  the  actual  rental  is  only. $1,620, 904,  and  that  the  $315,983.67  is  paid 
out  only  as  a  matter  of  form,  because  it  comes  back  to  the  company  as 
a  return  on  the  securities  of  the  leased  lines  in  the  treasury  of  the  com- 
pany 

Summary  of  the  Important  Facts. 

To  sum  up  this  phase  of  the  rentals  matter  briefly 
these  are  the  important  facts : 

1.  While  the  rental  we  pay  for  leased  lines  ($1,620,904) 
is  equivalent  to  an  average  of  7.50  per  cent,  of  the  par 
value  of  the  securities  ($21,612,144)  outstanding,  such 
rentals  are  but  5  per  cent,  of  the  total  valuation  of  the 
property  of  the  leased  lines. 

2.  The  total  of  these  securities  is  considerably  less 
than  one-third  of  the  total  capitalization  of  the  system. 
The  value  of  the  property,  however,  is  almost  one- 
half  of  that  of  the  entire  system,  and  every  line  leased 


30  Why  an  8-Cent  Fare 


was  necessary  to  a  complete  system  which,  with  trans- 
fers, could  give  the  best  and  most  convenient  service. 

3.  That  the  value  of  these  properties  is  sufficient  to 
justify  the  rentals  is  attested  by  the  appraisals  made 
upon  them  by  the  State  and  City  of  New  York  for 
purposes  of  taxation.  Taking  as  a  basis  the  average 
State  valuation  of  the  special  franchises,  $20,302,331 
(which  includes  not  only  tracks,  etc.,  but  franchises 
which  we  have  not  included  in  the  foregoing  tables), 
and  the  1918  assessment  of  real  estate,  $9,392,500,  the 
total  return  actually  paid  to  security  holders  of  leased 
and  controlled  lines  is  less  than  5%  per  cent,  on  the 
valuation. 

The  actual  situation  is  that  if  we  paid  no  rentals  at  all 
we  would  still  be  unable,  on  our  present  rate  of  income, 
to  pay  the  full  interest  on  our  mortgages. 

Another  Important  Phase. 

But  there  is  another  very  important  aspect  of  this 
question  of  leases  to  be  considered:  What  the  situa- 
tion would  be  if  the  properties  in  their  present  im- 
proved condition  were  to  revert  to  the  lessors,  as  a 
result  of  a  receivership. 

There  can  be  nothing  saved  to  the  public  by  forcing 
the  bankruptcy  of  this  company  and  the  consequent  re- 
turn of  the  leased  lines  to  their  owners.  On  the  con- 
trary, those  owners  would  be  entitled  to  charge  a  full 
five-cent  fare  for  a  ride  on  each  of  their  lines,  with  no 
obligation  to  exchange  free  transfers.  Even  if  through 
routing  and  joint  rates  were  ordered  they  would  have 
to  be  at  a  rate  high  enough  to  produce  at  least  6  per 
cent,  return  upon  the  fair  value  of  the  property  used 
by  the  public  to  avoid  having  the  orders  set  aside  by 
the  courts  as  confiscatory. 

jfj  *jc 

Were  the  Leases  Improvident? 


The  last  aspect  of  the  rentals  that  seems  to  demand 
consideration  here  is  presented  by  this  question :  "Ad- 


On  The  Green  Car  Lines? 


3! 


mitting  the  present  value  of  these  properties,  isn't  it 
true  that  these  leases  were  improvident  on  one  side 
and  at  excessive  rates  on  the  other  when  they  were 
made?"  We  hold  no  brief  for  the  lessors — indeed,  their 
interests,  in  a  sense,  are  antagonistic  to  ours — but 
these  observations  may  be  ventured : 

First:  These  leases  were  not  made  by  this  com- 
pany, but  were  taken  over  in  the  reorganization. 

Second :  They  were  made  before  the  enactment 
of  the  present  public  service  law,  and  at  a  time  when 
a  profit  in  electric  railway  business  was  not  illegal 
simply  because  it  was  large.  The  owners  had  a  legal 
right  to  deal  with  leases  on  the  basis  of  the  earning 
power  of  their  properties  and  demand  the  apparent 
investment  value,  or  "going  rate." 

Third :  This  company  has  made  every  reasonable 
effort  to  have  the  terms  ameliorated,  but  without 
success. 

Fourth :  It  is  not  contended  that  the  leases  are 
invalid  or  that  their  invalidity  could  be  established. 


32  Why  an  8-Cent  Fare 


IX. 

"EXCESSIVE  CAPITALIZATION." 

At  the  time  of  the  reorganization  a  joint  committee, 
representing  interests  in  both  the  Metropolitan  Street 
Railway  Company,  and  the  New  York  City  Railway 
Company,  made  a  plan,  for  reorganization  and  the  estab- 
lishment of  this  company,  which  reduced  the  former 
capital  by  $41,883,894.50. 

Ford,  Bacon  &  Davis,  well  known  public  utility  en- 
gineers, have  recently  completed  a  valuation  of  the 
company's  property  used  and  useable  for  the  public 
service.  This  shows  the  reproduction  cost  of  the 
property,  less  depreciation,  and  based  on  average 
normal  prices  covering  six  years,  to  be  approximately 
$70,000,000.  Based  on  present-day  prices,  this  valua- 
tion of  the  property  of  the  system  devoted  to  railway 
operation  would  be  nearly  doubled. 

This  valuation  of  the  property  does  not  include  any- 
thing for  franchises  taxed  by  the  State,  "going  value" 
of  the  character  recognized  by  authoritative  decisions, 
property  owners'  consents,  working  capital,  or  sundry 
other  values  on  which  a  return  should  be  allowed. 

(At  the  time  of  the  reorganization,  the  Public  Service 
Commission  fixed  a  valuation  of  the  Company's  prop- 
erties, for  the  issuance  of  securities  (not  for  rate-mak- 
ing purposes),  at  $85,801,000.  This  did  not  include 
either  franchise  or  "going"  values,  either  of  which 
would  have  brought  this  valuation  up  to  more  than 
$100,000,000.  Further,  more  than  $3,000,000  has  since 
been  put  into  the  property  in  additions  and  better- 
ments.) 

A  minimum  "fair  return"  to  the  Company  on  this 
valuation  of  $70,000,000  would  be  at  the  rate  of  7y2 


On  The  Green  Car  Lines? 


33 


per  cent.  It  would  result  in  the  very  modest  return  of 
5.06  per  cent,  to  the  stockholders.     The  calculations  car- 


ried through  are  as  follows  : 

Per  cent,  "fair  return"   7Yz 

Valuation  of  property  $70,000,000.00 


7y2  per  cent,  return   $5,250,000.00 

Less  interest  underlying  bonds   492,500.00 


$4,757,500.00 

Less  net  rentals   1,620,904.00 


$3,136,596.00 

Less  interest — 1st  mtg.  4  per  cent  bonds  722,541.00 

$2,414,054.00 

Less  full  5  per  cent,  interest,  adjust- 
ment bonds   1,530,474.00 


Balance  available  for  stock   $883,580.00 

This  sum  is  equivalent  to  5.06  per  cent,  dividend  on 
the  stock. 

"Excessive  Capitalization"  Not  Material. 

Before  the  enactment  of  the  Public  Service  Law  the 
question  of  excessive  capitalization  had  importance. 
Today,  however,  in  any  case  for  the  determination  of 
the  proper  income  of  a  public  utility,  the  point  is  im- 
material, be  it  in  a  regular  "rate  case"  for  the  deter- 
mination of  a  return  upon  the  value  of  the  property, 
or  in  an  "emergency  case,"  which  is  only  for  the  con- 
sideration of,  temporary  measures. 

Public  Service  Commissioner  Jerome  L.  Cheney,  in 
an  opinion  written  in  November  in  the  case  of  the 
New  York  State  Railways,  said : 

"Although  the  commission  has  stated  many  times  the  true 
rule  which  must  be  adopted  in  determining  what  is  meant  by 


34  Why  an  8-Cent  Fare 


'return  on  invested  capital'  as  applied  to  a  rate  case,  we  will 
risk  a  repetition  of  it,  for  the  reason  that  the  arguments  made 
in  almost  every  case  which  comes  before  the  commission  show 
that  the  rule  is  not  generally  understood.  'Invested  capital,' 
for  the  purpose  of  computing  rate  of  return  to  a  public  service 
corporation,  means  the  actual  value  of  the  property  used  in 
giving  the  service. 

''This  has  no  connection  whatever  with  the  share  capital  of 
the  corporation,  nor  is  it  material  whether  the  capital  was 
raised  by  the  issuance  of  bonds  or  the  sale  of  stock. 

"Neither  does  it  make  the  slightest  difference  whether  the 
issued  capital  stock  is  'watered'  or  not  nor  to  what  extent  the 
'water'  may  be  present.  The  injection  of  'water*  cannot  add 
one  cent  to  the  value  of  the  property  which  is  actually  used  and 
that  is  the  only  inquiry  which  the  commission  is  interested  in." 

This  is  the  established  doctrine  of  Public  Service 
Commissions  everywhere.  In  the  interest,  however,  of 
providing  full  information  the  facts  about  the  New 
York  Railways  Company  capitalization  are  set  forth 
as  above. 


On  The  Green  Car  Lines? 


35 


X. 

"EXCESSIVE  OVERHEAD." 

The  accounts  of  the  New  York  Railways  Company 
are  kept  in  accordance  with  forms  prescribed  by  law, 
and  sworn  reports  are  made  to  both  National  and  State 
authorities.  These  reports  are  open  public  documents. 
The  Public  Service  Commission  has  the  power  of  inspec- 
tion of  the  companies'  financial  operations  and  disburse- 
ments. There  is  no  detail  which — in  contrast  to  nearly 
all  other  forms  of  business — is  not  available  to  the  offi- 
cials at  all  times. 

What  Is  Paid  for  "Salaries." 

The  total  amount  paid  by  the  New  York  Railways 
Company  in  the  fiscal  year  ended  June  30,  1918,  for 
salaries  of  general  officers  was  $92,700.  The  figures 
which  are  set  out  below  are  made  upon  the  following 
classification : 

1.  General  officers  to  include  the  President,  Vice- 
President,  Vice-President  and  General  Manager,  Assist- 
ant to  the  President,  Treasurer,  Secretary,  Auditor, 
General  Counsel,  General  Attorney  and  Director  of 
Welfare. 

2.  Other  officers  and  salaried  employes  to  include  all 
other  officers,  clerks,  stenographers,  bookkeepers,  etc., 
and  men  paid  monthly  not  included  in  subdivision 
No.  1. 

Much  for  Labor,  Little  for  Salaries. 

Out  of  each  5  cents  collected  in  the  fiscal  year  only  a 
fraction  of  a  cent  went  for  salaries,  viz. : 

FOR  SALARIES. 

To  general  officers   4-100  of  a  cent 

To  other  officers  and  salaried  employes..  .       30-100  of  a  cent 


Total  to  general  officers  and  all  other 

salaried  employes   34-100  of  a  cent 

Going  for  wages   2  20-100  cents 


36 


Why  an  8-Cent  Fare 


THE  WHOLE  PAYROLL,. 

To  all  employes,  or  total  payroll  disburse- 
ments   2  54-100  cents 

PAYROLL  PERCENTAGES. 

Per  cent. 

Portion  of  total  payroll  going  to  general  officers,  other 

officers  and  salaried  employes   13.44 

Total  portion  going  for  wages   86.56 

Total   100.00 

In  other  words,  out  of  every  125  five-cent  fares  col- 
lected only  one  went  for  salaries  of  the  general  officers. 

Other  Comparisons. 

Out  of  every  dollar  of  operating  revenue  only  a  frac- 
tion of  a  cent  was  paid  for  salaries  and  expenses  of  the 
general  officers  during  the  last  five  fiscal  years,  as 
follows : 

Out  of  each  dollar  of 
Year.  operating  revenue. 

1914   71-100  of  a  cent 

1915   72-100  of  a  cent 

1916   66-100  of  a  cent 

*1917   79-100  of  a  cent 

1918   78-100  of  a  cent 


*  Strikes  in  effect  in  first  half  of  this  fiscal  year. 

Similarly  each  dollar  of  operating  expenses  includes 
slightly  more  than  1  cent  for  salaries  and  expenses  of 
general  officers  during  the  last  five  fiscal  years,  as 
follows : 

Out  of  each  dollar  of 


operating 

Year.  expenses. 

1914   1  12-100  cents 

1915   1  13-100  cents 

1916   1    8-100  cents 

♦1917   1  16-100  cents 

1918   1  14-100  cents 


*Strik-s  in  effect  in  first  half  of  this  fiscal  year. 


On  The  Green  Car  Lines? 


37 


Other  Disbursements. 

After  wages  and  salaries  the  other  disbursements 
are  for  materials  and  supplies  (more  than  3,000  items), 
taxes,  interest,  equipment  and  repairs. 

It  might  be  mentioned,  in  passing,  that  94.06  per 
cent,  of  the  total  payroll  costs  above  referred  to  ap- 
plies to  Operating  Expenses,  only  5.94  per  cent,  of  such 
total  being  charged  to  "additions  and  betterments"  to 
the  plant  and  to  other  non-operating  accounts. 

Increases  of  Wages. 

The  increases  in  wages  since  October,  1914  (average 
rate  of  pay  per  day  per  man),  for  Maintenance,  Opera- 
tion and  Miscellaneous,  have  been  69.23  per  cent. 

The  increase  in  rates  of  wages  since  1915  for  operat- 
ing the  system  have  been  enough  to  increase  the  pay- 
roll (for  the  same  number  of  men)  by  $3,250,000  a 
year. 

NEW  YORK  RAILWAYS  COMPANY. 

President 


/ 


\ 


